Gas-guzzling clunkers surround Caracas climate conference

With gas prices at $0.10 per gallon, Venezuelans find no reason not to drive Nixon-era clunkers.

By
Matthew E. Kahn, Guest blogger /
December 13, 2010

sc4 / ZUMA Press / Newscom / File

(Read caption)
American classic cars line the streets of Maracaibo, Venezuela in May 2006. Cars from the 1970s had terrible gas mileage and now-unacceptable levels of pollution, but that doesn't stop residents of Venezuela, who can buy gas for a dime a gallon so feel no pressure to move to high-efficiency automobiles.

With gas prices at 10 cents per gallon, the people of Caracas can splurge on fuel inefficient vehicles and the early 1970s live on. Now, we know that Venezuela is not a rich nation and that vehicles over age 30 are not demanded by rich people. This combination of cheap gas and demand for relatively "low quality" roomy cars creates an economic environment in which durable cars can live on for a long time.

This point is exactly what Lucas Davis and I were thinking about when we wrote our NAFTA paper. You remember that one? Here is the abstract: